Real Estate Blind Spots: The Difference Between Buying Dinner and Selling Your Home

03/20/2017 11:40 am ETUpdated
Mar 27, 2017

On the face of it the difference between buying dinner and selling your home should be pretty obvious. But watching how people act, you’d have to think they can’t see it.

A house is a big deal. It requires most people to sit down every month, for 30 years, and pay what is likely to be their single largest budgetary expense. Home owners and their families have more physical and emotional contact with their home than any other item and it is likely the most expensive thing to maintain of anything they own. It’s the most expensive thing they will ever buy, and it’s expensive, both monetarily and emotionally to sell. Additionally, the buying and selling of a home is a relatively rare life event. Compared to other purchases, certainly compared to the activity of buying dinner, it’s an unusual occurrence.

Choosing where to eat? Maybe a little stressful, but essentially buying dinner is something that people do all the time. While maybe not limited to dinner exclusively, Americans eat out 4-5 times a week. If you extrapolate that over an average life, say that’s 18 times per month, which makes 216 times per year. If you think of just between 21 and 80 as “dining out years” (a term I just made up) you get almost 13,000 meals in a lifetime. Your numbers may vary, but any way you slice it, compared to the 3-5 homes you will buy/sell in your life there’s a pretty clear disparity in numbers.

The thing that most fascinates me about this situation is simply: given the obvious, vast, difference in impact and frequency of home purchasing compared to eating out, how is it even vaguely rational to use the same methodology to choose who will represent you in your home sale as you use to determine where to eat?

I only ask because I see it happen every single day.

People consistently use the same thinking, planning and acting they use to pick where to eat as they do to pick their real estate agent. They talk to their friends and they check for reviews online. That’s it. That is by far the most used methodology. Every poll conducted shows that over 70% of people hiring a real estate agent will hire the first one they speak with.

My writing now is simply a matter of my inability to get over that phenomenon. Why do people behave that way? How could someone take the most expensive thing they own and put it in the hands of someone who’s actual performance was unknown to them (especially when the actual performance was relatively simple to ascertain)? What makes people hire their best friend’s cousin, or their kid’s soccer coach to represent them in the largest financial transaction of their life, without doing the due diligence to determine the likely outcome of doing so? In a transaction that’s so singularly important and impactful, why do people do no more research than they do when looking for where to eat dinner on Yelp?

This inquiry led to my writing my first book, Don’t Get Fooled Again: An Insider’s Guide to the 7 Questions You Must Ask to Avoid Hiring the Wrong Real Estate Agent Again. Here I was, a relatively newer agent, selling homes for considerably more than average, and in considerably less time, and not one person I went to see about listing their home ever asked me about that. People out to sell their home never, and I mean never, not one single time, ever asked me anything about my past track record. Occasionally someone will ask to see my marketing plan, or maybe some other tangentially irrelevant (although to them logical) question, but the question that points most to the goal of a home seller (getting the most money, in the least time, with the least hassle) is never asked.

I believe the answers rest in some fundamentals of behavioral economics, i.e. the heuristics of representativeness, availability, confirmation bias, anchoring and prospect theory, and I explore these in my second book, Real Estate Blind Spots: How the Way You Think Makes You Lose Money, Waste Time and Creates a More Stressful Experience When Buying or Selling Your Home (out in June 2017). While the actual heuristics are interesting to me, so is the massive resistance I get when I propose this. I suspect, that when confronted with having taken what are obviously irrational actions, it’s natural for people to get defensive.

My experience is that people are, to at least some degree, convinced, and ready to argue, that either, A) all Realtors are the same or, B) at least, there’s no quantifiable way to measure the difference.

Let’s look at these two assertions.

First, are all Realtors are the same? I’ve had prospective clients say these words to me when I question the method they were using to select their next Realtor. The claim that all Realtors are the same is silly when it’s said out loud. Nobody says all doctors are the same. Or lawyers, or cooks or auto mechanics - I mean, other than saying it in some derogatory, HEY, YOU KIDS, GET OFF MY LAWN, fashion.

Nobody would seriously argue that all “anythings” produce the same results. I mean, obviously, there are good and bad in every profession, and yet, people’s behavior would indicate that they fail to recognize this.

This cognitive failure shows up when they say things like “My kid’s soccer coach is a nice woman, I’ll give her a shot”, or “This guy, I just met, once, for 15 minutes, at this open house, seems cool. Let’s use him” or “My friend likes this person so they must be good”. These actions essentially communicate that there is no measurable difference between real estate agents so I might as well use the person I think of first. People do this all the time, and, if they stopped to think about what they’re doing (with the single most expensive, most impactful, thing they ever buy or sell) they might take pause.

Because they are not aware of how easily they could quantify the degree one real estate agent is better at producing the desired result than another, they’re reduced to comparing everybody using the same criteria they use to pick where to eat dinner.

So let’s examine the second assertion, that there’s no easy way to quantify the difference in performance between Realtors.

First of all, you’ll need to be clear of the performance you’re looking for from the Realtor. If you’re looking to maximize social capital then hiring your kid’s soccer coach is a better move than hiring a stranger. If hiring someone other than your brother-in-law would make family holidays unbearable, then hiring your brother-in-law is worth considering.

Most people however, wouldn’t say they are selling their home to make friends. Most say their goal is to get some combination of the most money, in the least time, with the least hassle. If that really is your goal, why would you not organize yourself to get that information? Every agent has a track record. Why not simply ask for it?

This is so mind numbingly simple it sort of shocks people when I mention it. Do you know you can ask any Realtor you are interviewing to bring you the listing sheets from their last 12 months of sales? This is their track record. You’ll be able to see how many houses they sold, what price they listed the houses at, what they sold those houses for, and how many days on market it took to sell them. BAM! All the pertinent information needed for someone looking to get the most money in the least time. It’s literally right there for the asking.

At that point you can now compare apples to apples. And the best part? You can do this by email before you spend a moment of your time meeting the wrong people. Ask the agents to email it to you and then call the top performers for a face to face so you can hire the one who’s personality matches yours best.

What about the least hassle part? For that, I do think online reviews are a decent place to start, but better yet, ask for references you can call. You do know that when hiring someone for any job most people look for references to call, don’t you? Why is hiring a Realtor different?

Have you ever done anything like what I’m suggesting? Most people haven’t and I’d love to hear what you’ve done that works, and what hasn’t worked. What have you done to interview agents in the past? Any great stories to share? Any nightmares? I’d love to hear what happened.

In preparation for my new book, I’m running a survey of homeowners to see more clearly what goes in to the process of choosing a Realtor. If you’re a homeowner and would like to participate please click here, it’ll only take a few minutes and will help immensely - plus I’ll send you a copy for free just for participating.